Securities laws and private investors

[Matt Geerts]

I am on the threshold of needing to raise large quantities of money (large is relative, so I'm talking in the 500k-1.5M). My plan is to offer investments in three ways:

1) first mortgage of the full amount

2) second mortgage to cover the gap between owner or bank financing and the remainder of my needs

3) A group of investors all contributing to a single first mortgage

Numbers 1 and 2 are simple enough in terms of mechanics, and I don't want to get into the mechanics of #3 here. What I'm wondering is, who is ALLOWED to invest with me in these ways? Who can I approach and offer a deal? I want to avoid lengthy and expensive legal processes - I just want to ask for a mortgage from friends, family, associates and perhaps strangers.

I just read that the 150k minimum investment exemption has been abolished. I don't even know if this applies to me or not.

So, can someone give me a breakdown of the rules? Of course, nobody cares about the rules when everyone makes money, but when there's a loss I don't want to be broke AND imprisoned. 

If you are not from Ontario, or know specifically about Ontario (the province, not the city in Cali), please don't offer your speculative input.

[Luc Boiron]

@Matt Geerts @Roy N.

Sorry for the delay in responding.  None of this is legal advice, as I am not a practicing lawyer and this is only my opinion.

I learned this stuff in law school, but I've forgotten most of it by now. The crowdfunding exemption is a newer one, and I looked into it likely around the same time Roy was. I wouldn't count on it now, there a lots of requirements for it. Even once they do get proper crowdfunding platforms approved and out there, my understanding is that you would need to go through a platform. You can't just grab a bunch of people in small amounts and call it crowdfunding, it needs to go through an approved and regulated platform.

Accredited investors is always the easiest exemption, similar to the States.

The "Friends and Family" exemption also exists to allow you to raise money. You need to have an existing prior relationship with friends. Here is some info on it: http://www.osc.gov.on.ca/en/NewsEvents_nr_20150219...

Also, here is some general info on prospectus exemptions in Ontario: http://www.osc.gov.on.ca/documents/en/Securities-C...

I am unsure of this, but I also believe that you do not need a prospectus exemption to partner with individuals. I would love Roy's opinion on this, but I believe that if you go into a JV or a partnership with someone, you may not be offering a security but rather operating a partnership, and would not need to rely on any of the exemptions.

Wish I had a more concrete answer.